Tax evasion in property sales is estimated up to 70 billion euros

A recent conversation between a contractor in southern Athens and a potential buyer interested in one of the 120-square-meter apartments that will start being built in the block in the coming weeks, is illuminating of the situation in the Greek real estate market.

“The apartment costs 360,000 euros. If you’re interested, I’ll explain how the sale will go: The contract will say 240,000 euros, which is the property’s objective value, and you will bring the remaining 120,000 euros to my office, when we reach a deal,” the unnamed contractor told the shocked client.

The uninitiated interested buyer posed all sorts of questions as he tried to get to grips with what he was being told: “Are you asking me to go to my bank, withdraw 120,000 euros and bring it to you at your office, cash in hand?” he asked, among other things.

The answer he got pointed to a professional who has obviously been through this process on numerous occasions: “Don’t worry, you can withdraw cash from banks now. Of course if you’re worried and prefer to pay the entire sum through the banks, then the price will go up to more than 400,000 euros, as it will have to include the tax I pay,” the contractor said, referring to the value-added tax.

The above conversation, a real incident in which a contractor asked a buyer to become an accomplice to tax evasion, serves to prove that auditing authorities need to start paying closer attention to the building sector to curb such practices, which have become dominant since long before the outbreak of the financial crisis.

The earnings made from such practices are usually hidden away in foreign banks, typically as deposits at offshore institutions.

Property market professionals allege that this “procedure” is not an exception utilized by one corrupt contractor, but the rule.

At least 40 billion euros of undeclared income (from the difference between the taxable and the actual value of properties) are estimated to have changed hands in the construction sector in recent years.

Hellenic Statistical Authority data showed that 800,000 properties were sold in 2001-2010, most at prices high above the objective value.

A conservative estimate of the difference between 60,000 and 80,000 euros per property shows undeclared revenues may have come up to 70 billion euros.